Obtaining 501(c)(3) Non-Profit Status

Will You Need to File Taxes Once You're Non-Profit

Though they are exempt from income taxation, tax-exempt organizations are generally required to file an annual return (Form 990 or Form 990 EZ) of their income and expenses with the Internal Revenue Service.

Starting in 2008, small tax-exempt organizations that previously were not required to file Form 990 may be required to file an annual electronic notice (Form 990-N).

Note! Most tax-exempt organizations must file a yearly return or notice with the IRS. It is very important to keep up-to-date on your reports to the IRS. If an organization fails to file its annual return or notice for three consecutive years, it loses its tax-exempt status! Filing requirements for charities can be found at http://www.irs.gov/charities/article/0,,id=217087,00.html

If your group brings in income that is unrelated to your nonprofit mission, you will need to file an unrelated business income tax return. If you have employees, you may be required to pay Federal Income Tax Withholding, Social Security tax, and Medicare taxes. In addition, some tax-exempt organizations are responsible for Federal Unemployment Tax.

IRS Resources

The IRS has just published a new brochure that provides a brief overview of what will be required of you once you have obtained tax-exempt status:

• Publication 4221, Compliance Guide for 501(c)(3) Tax-Exempt Organizations (PDF 298K)
• Visit the IRS site at http://www.irs.gov/charities/charitable/article/0,,id=123310,00.html for additional in-depth information.